Despite what the Abbot Government is saying, Australian miners will actually receive very little benefit from the Australia-China free trade agreement signed on Monday, according to analysts Wood Mackenzie.
A brief prepared by Wood Mackenzie says that while free trade agreement (FTA) appears to be positive for Australia, particularly for alumina and metallurgical coal, the actual benefits for Australian miners will be limited.
The report says that under the FTA, the thermal coal tariff will be phased out over the next two years which could lead to tariff payments of US$600million over 2015-16. This will be split between producers and consumers, with Wood Mackenzie suggesting much of this will be borne by Australian miners.
While the alumina tariff is formally abolished under ChAFTA, it’s understood by Wood Mackenzie that it has not been implemented since 2008. Alumina exporters therefore receive no immediate financial benefit from the deal, but will welcome the certainty that this tariff will not re-appear.
Under the FTA ChAFTA will establish specific mechanisms for reviewing Non-Tariff Measures (NTMs), “But it is worth considering that on the surface, there appears little to prevent China from continuing to implement alternative restrictions on resources imports,” the report says.
“For example, China’s NDRC has implemented thermal coal import quotas for major utilities in 2014, and it is unclear if these will extend into future years. Recent coal quality restrictions may also impact small volumes of thermal imports into non-industrial users.”
The free trade agreement was signed by Australian Prime Minister Tony Abbott and Chinese President Xi Jinping on Monday, with the government saying it, “will contain measures to provide a tangible boost to the national resource industry including abolishing or phasing out tariffs on a range of export commodities including coal, copper and aluminium.”
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